Italy’s Gold: What’s the Use?

If you were a populist politician in Italy, you could probably generate a lot of noise about Italy’s huge gold reserves. There they are, the third largest national gold stockpile in the world, and you need the permission of the European Central Bank’s governing council in Frankfurt to do anything with them.

There are people, judging from my Twitter feed, who think it would be a travesty to use them to help ease Italy’s financial travails because it’s “monetary gold,” which raises the question of what 2,450 metric tons of the inert yellow metal held by the Bank of Italy is actually for. (This is the amount left after Italy’s contribution to the ECB’s own capital, 15% of which has to be in gold.)

My Brussels Beat column today discussed an idea about how that gold might be used to lower the borrowing costs of Italy and Portugal, the two peripheral euro-zone economies with the largest gold reserves in relation to the size of their economies.

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This isn’t going to happen tomorrow, and may not happen at all, for reasons explained in the piece. But for those who are interested, here’s the paper from Ansgar Belke, for the University of Duisburg-Essen, cited there.

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The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.